Chemical manufacturer avoid three common failure patterns

When R & D institutions of chemical manufacturer is difficult to fulfill their promises, they often encounter one of the three common failure modes.

Powerful teams are running around. Lack of a clear strategic direction or source of profits can be a distraction. Some companies spread their R & D investment over too many products, end markets and customers, hoping to win home runs. These organizations often attract top researchers, but the lack of direction weakens R & D returns.

A specialty chemical manufacturer that has expanded its business to more than 40 end markets has found that 70% of its revenue and more than 95% of its profits come from three markets. Its customer loyalty score in these areas is higher than that of its competitors, but its R & D resources in these areas are less than half of its R & D resources. By shifting 80% of its R & D focus to these three areas, the company has increased its market share in the most profitable areas, with an analyst saying it has “the industry’s enviable R & D engine.”.

Reducing focus usually requires some discrete operations.

A sound strategic planning process. Ensure that the strategic planning process involves the leadership of strategy, line of business, sales and R & D departments to achieve a specific level of priority market segmentation, so as to guide the allocation of R & D resources.

Create a profit cube. Let financial institutions do hard work to build a profit cube that surpasses revenue and gross profit margin to explain the total operating profit of each product, region, terminal market and sometimes even customers.

There should be discipline on where to compete and where not to compete. Implement tough choices about when to terminate projects and where to invest, rather than diversifying investment into too many end markets.

Obsessed with cool engineering issues rather than customer needs. Challenging issues can be more interesting than delivering features that customers will buy. Sometimes, the R & D department doesn’t invest enough time to understand the customer’s needs and product roadmap, or can’t translate them into requirements. There are several ways to introduce customer opinions into the process.

Understand the needs of customers. Ask customers how they will allocate your R & D spending. When a company understands that its customer’s first priority is to improve resin properties to achieve a faster injection molding process, it shifts its focus from developing new products to solving this problem. R & D works closely with business groups to evaluate existing designs and competitors’ designs to develop more valuable resins and then let the company raise prices.

Partners and customers. 3M likes to talk about the importance of building deep intimacy with customers or “staying in the chimney for a while”, that is, going to the customer’s place. Leading chemical companies set up innovation communication centers to let customers’ product development teams share their roadmap. This helps to determine how the performance of chemical products needs to be developed to meet new requirements. These exchanges often involve product disassembly – for example, classifying metal parts of a car to determine which high-performance plastics can reduce weight. Rapid prototyping provides another opportunity to approach customers – that is, if chemical companies can achieve rapid alignment of key technical personnel and closer alignment with external supply chains.

Expand R & D investment in customers and markets. New products or applications are often sold to only one customer, but they can often be re applied to other customers and adjacent markets. This requires close integration among R & D, strategic marketing and sales organizations.

Clarify the decision-making rights and responsibilities of key decisions. A specialty chemical manufacturer has simplified decision-making, reducing the number of decision-makers for new R & D projects from the usual 20 plus to two. The company has introduced new roles, including a project manager to accelerate application development projects to market, and a new technology sales role to source new projects. Finally, weekly review meetings with business leaders, sales, R & D, and supply chain teams determine the feasibility of the new project. These changes increased profits by 15% in a year.

Use the phase gate discipline to adjust the development process according to the innovation cycle time. Some R & D departments focus on developing applications that respond to customer needs. As a parameter of quality and success, there are few stage gates. Many chemical manufacturers rely on Agile Technology in these projects. In contrast, real research projects pursue unformed demand based on market trends or vaguely defined opportunities. This type of innovation requires countless successive stages, as well as executives’ ruthless honesty to business cases.

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